Stuart Park Associates Ltd. Partnership v. Ameritech Pension Trust

• Citation: 51 F.3d 1319
• Decision Date: 03 April 1995
• Docket Number: No. 94-2641,94-2641
• Parties: STUART PARK ASSOCIATES LIMITED PARTNERSHIP and Stuart Park/Summit Partners, Plaintiffs-Appellants, v. AMERITECH PENSION TRUST, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 1319

51 F.3d 1319

STUART PARK ASSOCIATES LIMITED PARTNERSHIP and Stuart

Park/Summit Partners, Plaintiffs-Appellants, v. AMERITECH PENSION TRUST, Defendant-Appellee.

No. 94-2641.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 7, 1994.

Decided April 3, 1995.

Ira J. Bornstein, Harvey J. Barnett, John A. Fritchey, IV, Barnett, Bornstein & Blazer, Chicago, IL, Leonard L. Gordon, Benjamin S. Boyd, Lewis A. Noonberg, David H. Bamberger (argued), Piper & Marbury, Washington, DC, for plaintiffs-appellants.

Alfred W. Whittaker, Kirkland & Ellis, Washington, DC, Frank Cicero, Jr. (argued), Anni Najem, Kirkland & Ellis, Chicago, IL, for defendant-appellee.

Before COFFIN, ^* CUDAHY and ROVNER, Circuit Judges.

CUDAHY, Circuit Judge.

This case involves an appeal from a jury's determination that two partnerships formed for the purpose of developing a parcel of land are not entitled to recover funding from potential investors who ultimately refused to advance funds due to legal concerns. Stuart Park Associates Limited Partnership and Stuart Park/Summit Partners, the partnerships behind a real estate venture known as "Stuart Park," attempt to impugn the jury's verdict on appeal. They assert that they were in fact entitled to recover under an Investment Agreement that they entered with Ameritech Pension Trust. They allege numerous errors about matters at trial, including complaints about jury instructions, about the district court's comments before the jury and about various evidentiary rulings. Because we approve of the manner in which the district court handled matters at trial, we affirm.

I.

Stuart Park Limited Partnership and Stuart Park/Summit Partners (collectively, Summit) were formed for the purpose of developing a parcel of land in Arlington, Virginia. Summit planned to develop this land and build a high rise apartment complex to be called "Stuart Park." As part of the plans for Stuart Park, Summit sought to interest various investors in the project.

One of those investors was Ameritech Pension Trust (Ameritech). During the Fall of 1989, Summit began discussions with L & G Realty Advisors (L & G), one of Ameritech's investment advisors. By May 1990, Summit had made little progress in committing potential investors to funding for Stuart Park. Ameritech, for instance, had not responded to Summit's numerous entreaties. Summit's primary problem at Ameritech was attracting the interest of Ameritech's Director of Real Estate Investments, Lloyd B. Thompson, III (Thompson). Repeated efforts to interest Thompson in Stuart Park met with failure; Summit could not even succeed in getting Thompson to examine or discuss the project.

Finally, Summit contacted Donald Bennett (Bennett), one of Thompson's long-time real estate associates. Summit discussed Stuart Park with Bennett and suggested that he might be of assistance in securing Thompson's attention. Summit soon agreed to hire Bennett as a "broker" for Stuart Park. Summit and Bennett decided upon the one-time fee of $350,000.00. The parties dispute Bennett's precise duties under this arrangement. It is clear, however, that one of Bennett's obligations was to interest Thompson in Stuart Park. Bennett was soon successful in creating this interest.

At a meeting of Ameritech's Asset Management Committee, Thompson recommended that Ameritech invest more than $32 million dollars in Stuart Park. Ameritech acted upon his advice. In June 1990, Ameritech's Asset Management Committee approved the proposed investment. Negotiations for the funding began, and in September 1990, Summit and L & G (on behalf of Ameritech) signed an Investment Agreement. This Investment Agreement, among other things, obligated Ameritech to provide over $32 million in funds for Stuart Park.

Just prior to the signing of the Investment Agreement, Ameritech began conducting an internal investigation of alleged improprieties in an unrelated matter. In this regard, Ameritech hired attorney Howard Pearl, a former Assistant United States Attorney specializing in financial fraud. Pearl began conducting an internal investigation. While carrying on the investigation, he uncovered invoices that raised questions about Thompson's conduct. When he learned that Thompson planned to leave Ameritech at the end of September, Pearl shifted the focus of his investigation to Thompson.

Pearl first interviewed Thompson on September 25, 1990, a few days before Thompson's scheduled departure. Later that night, a security guard caught Thompson attempting to remove documents from his office. The security guard confiscated the documents, which revealed the particulars of the Bennett-Thompson relationship as it concerned a number of Ameritech's past investments. A note on one of the documents stated "Stuart Pk--$350 when close deal." R.App. 425.

In November 1990, Ameritech assembled a group of outside counsel to discuss the findings of Pearl's investigation and to analyze Ameritech's legal obligations as a pension trust. The group concluded that a kickback scheme existed between Thompson and Bennett, that the scheme violated federal law and that federal law prevented Ameritech from proceeding under its contract with Summit. On November 19, 1990, Ameritech accordingly notified Summit that it could not go forward with funding for Stuart Park.

The parties attempted negotiations. Summit took the position that any kickback scheme was Ameritech's problem and none of Summit's concern. When Ameritech steadfastly continued to refuse funding, Summit brought suit to recover under the Investment Agreement.

Summit originally asserted various claims, including claims for breach of contract and promissory estoppel. On a motion for summary judgment, the district court dismissed some of these claims, but ruled that the remainder of them needed to be submitted to the jury. In particular, the district court held that the jury should examine Ameritech's in pari delicto defense, in which Ameritech claimed that the Investment Agreement should not be enforced due to Summit's awareness of the illegality, because it presented a factual dispute. The court also found issues surrounding the promissory estoppel claim, particular elements of damage and the alleged failure of a condition precedent appropriate for jury submission. The court further ruled that Ameritech's suggestion that the contract was illegal was without merit because Ameritech's own agent, Thompson, had participated in the illegal circumstances of which it complained. Summary judgment was therefore granted in part and denied in part.

The parties went to trial. Once there, Ameritech presented the in pari delicto defense, as well as defenses based on breach of warranty and the failure to satisfy a condition precedent. The jury returned a general verdict in Ameritech's favor, finding that nonperformance of the Investment Agreement was justified. Summit appeals, making various complaints about the district court's choice of jury instructions, its statements to the jury and certain of its evidentiary rulings.

II.

Summit's first complaints on appeal concern the district court's dealings with the jury. First, Summit suggests that the district court erred in instructing the jury about the doctrine of in pari delicto; the instruction used purportedly permitted the jury to deny relief if it found that Summit was recklessly indifferent to Thompson's wrongdoing. A proper instruction, claims Summit, would have focused on the parties' relative fault in the complained-of transaction. Second, Summit suggests that the district court improperly characterized the Investment Agreement as a "prohibited transaction." Summit asserts that such a characterization unfairly prejudiced it in the eyes of the jury.

The district court made the following statements to the jury:

The Court has previously ruled that Donald Bennett and Lloyd Thompson participated in a fee-splitting or kickback scheme in relation to the Stuart Park project.

The Court has previously ruled that the kickback scheme between Donald Bennett and Lloyd Thompson means that the transaction was a prohibited transaction that violated ERISA.

If you find that the defendant has proved that the plaintiffs' management knew or was recklessly indifferent to the wrongdoing of Bennett and Thompson prior to November 19, 1990, then you must find for the defendant.

And as to that, you can rely on any evidence that was presented to you, regardless of when it relates to, but what you would have to find is that the state of mind, meeting that standard in the instruction, existed prior to November 19, 1990.

R.App. 229. Despite Summit's complaints, we do not find these statements objectionable in the context of the present case. The focus of the parties' argument at trial renders any error in the submitted instruction harmless. Additionally, we do not believe that by using the term "prohibited transaction" the trial court prejudiced Summit's case. We therefore affirm.

A. The In Pari Delicto Problem

The crafting of jury instructions is largely a matter within the district court's discretion. Heller Int'l Corp. v. Sharp, 974 F.2d 850, 860 (7th Cir.1992). Appellate review of jury instructions is therefore circumscribed. A reviewing court will examine the instructions given to determine whether, as a whole, they were likely to have substantially impaired the jury's ability to understand the case. Needham v. White Laboratories, Inc., 847 F.2d 355, 358 (7th Cir.1988). This analysis examines an isolated clause in context to determine whether, despite inaccuracy or ambiguity, the complaining party suffered any prejudice as a result of the error. Binks Mfg. Co. v. Nat. Presto Industries, Inc., 709 F.2d 1109, 1117 (7th Cir.1983).

Summit essentially makes three complaints about the instruction the district court gave concerning in pari delicto. First, it suggests that using a "recklessly indifferent" standard was prejudicial because it suggested to...